Search found 220 matches

by EfficientInvestor
Wed Oct 09, 2019 5:29 pm
Forum: Investing - Theory, News & General
Topic: HEDGEFUNDIE's excellent adventure Part II: The next journey
Replies: 1252
Views: 74975

Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Where do you get the dividends from? You can get total return data from VFINX going back to 1985 from Portfolio Visualizer. For years prior, you can get data here: https://www.multpl.com/s-p-500-dividend/table/by-year . I can’t recall if this is the source I pulled data from in the past, but it was...
by EfficientInvestor
Wed Oct 09, 2019 4:32 pm
Forum: Investing - Theory, News & General
Topic: HEDGEFUNDIE's excellent adventure Part II: The next journey
Replies: 1252
Views: 74975

Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

How do you get SPY1955 and SHY1955? Thanks You can pull S&P 500 index data from Yahoo Finance going back to 1928 ( https://finance.yahoo.com/quote/%5EGSPC/history?period1=-1325613600&period2=1570597200&interval=1d&filter=history&frequency=1d ). Then you can add in dividends to that to determine tot...
by EfficientInvestor
Wed Oct 09, 2019 6:13 am
Forum: Investing - Theory, News & General
Topic: HEDGEFUNDIE's excellent adventure Part II: The next journey
Replies: 1252
Views: 74975

Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Again, LT bonds still yield positive returns above RFR. TMF's fees are high enough that they nullify much of that but it's not as bad as -0.6%. As to the curve inversion: So then why wouldn't you just wait until it "straightens" back up and THEN establish your position with a positive expected retu...
by EfficientInvestor
Tue Oct 08, 2019 9:36 pm
Forum: Investing - Theory, News & General
Topic: HEDGEFUNDIE's excellent adventure Part II: The next journey
Replies: 1252
Views: 74975

Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Again, LT bonds still yield positive returns above RFR. TMF's fees are high enough that they nullify much of that but it's not as bad as -0.6%. As to the curve inversion: So then why wouldn't you just wait until it "straightens" back up and THEN establish your position with a positive expected retu...
by EfficientInvestor
Mon Oct 07, 2019 4:33 pm
Forum: Investing - Theory, News & General
Topic: HEDGEFUNDIE's excellent adventure Part II: The next journey
Replies: 1252
Views: 74975

Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Right. Let's do the same for the 3 month Treasury (the cash rate). Given our assumption about the random walk nature of rates, then the current 1.7% yield would be our expected return for cash for the upcoming decade as well. Given that our expected return on 2Y treasuries is 1.5% and our expected ...
by EfficientInvestor
Mon Oct 07, 2019 4:11 pm
Forum: Investing - Theory, News & General
Topic: HEDGEFUNDIE's excellent adventure Part II: The next journey
Replies: 1252
Views: 74975

Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

To your first point: Yes I understand and I hear you. I didn't just straight up ignore your post haha. You'll see my point in a moment. Let's continue: 2) Right now, 2Y treasuries yield 1.5%. Given that rates are as likely to go up as down, what would you say is the mean/average/expected return for...
by EfficientInvestor
Mon Oct 07, 2019 2:22 pm
Forum: Investing - Theory, News & General
Topic: HEDGEFUNDIE's excellent adventure Part II: The next journey
Replies: 1252
Views: 74975

Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Let's try my thought experiment. Let's forget about historical data. For a million and one reasons, it could lead you astray. Let's just start baby steps: 1) Do you truly believe rates follow a random walk? Like they're coin flips? As in "rates are as likely to go up than down"? Before I answer the...
by EfficientInvestor
Mon Oct 07, 2019 1:57 pm
Forum: Investing - Theory, News & General
Topic: HEDGEFUNDIE's excellent adventure Part II: The next journey
Replies: 1252
Views: 74975

Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Let's try my thought experiment. Let's forget about historical data. For a million and one reasons, it could lead you astray. Let's just start baby steps: 1) Do you truly believe rates follow a random walk? Like they're coin flips? As in "rates are as likely to go up than down"? Before I answer the...
by EfficientInvestor
Mon Oct 07, 2019 1:00 pm
Forum: Investing - Theory, News & General
Topic: HEDGEFUNDIE's excellent adventure Part II: The next journey
Replies: 1252
Views: 74975

Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Let's try my thought experiment. Let's forget about historical data. For a million and one reasons, it could lead you astray. Let's just start baby steps: 1) Do you truly believe rates follow a random walk? Like they're coin flips? As in "rates are as likely to go up than down"? Before I answer the...
by EfficientInvestor
Mon Oct 07, 2019 12:27 pm
Forum: Investing - Theory, News & General
Topic: HEDGEFUNDIE's excellent adventure Part II: The next journey
Replies: 1252
Views: 74975

Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

The rationale is similar to the rationale you are using to invest in leveraged stocks despite a historic bull market run and elevated evaluations. Nonsense. Equity valuations, while high, still point to a positive expected future return well above the RFR. Valuations would have to go well past 200 ...
by EfficientInvestor
Sun Oct 06, 2019 10:31 pm
Forum: Investing - Theory, News & General
Topic: HEDGEFUNDIE's excellent adventure Part II: The next journey
Replies: 1252
Views: 74975

Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Huh I thought you were going somewhere with it. Any ways, I definitely cannot rationalize adding a negative Sharpe ratio asset in my portfolio. Call me conventional I guess. Adding assets with a negative Sharpe could , maybe, lead to a higher overall portfolio Sharpe. But it's very unlikely and I e...
by EfficientInvestor
Sun Oct 06, 2019 10:17 pm
Forum: Investing - Theory, News & General
Topic: HEDGEFUNDIE's excellent adventure Part II: The next journey
Replies: 1252
Views: 74975

Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

I estimate that 40/60 stocks/30Y bonds should have a slightly higher expected Sharpe (within rounding error). Ok...what about something even closer to being a risk parity portfolio like 30% stock, 60% ITT, and 10% gold? I estimate that will have a slightly lower Sharpe than 100% stocks. Seriously, ...
by EfficientInvestor
Sun Oct 06, 2019 9:38 pm
Forum: Investing - Theory, News & General
Topic: HEDGEFUNDIE's excellent adventure Part II: The next journey
Replies: 1252
Views: 74975

Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Ok, let's try this. I estimate that 100% stocks will. Ok...how about 100% stock vs 40% stock/60% long term treasuries? Or anything in between? Or do you think that 100% stock will have a higher sharpe ratio than any portfolio containing treasury bonds? I estimate that 40/60 stocks/30Y bonds should ...
by EfficientInvestor
Sun Oct 06, 2019 9:05 pm
Forum: Investing - Theory, News & General
Topic: HEDGEFUNDIE's excellent adventure Part II: The next journey
Replies: 1252
Views: 74975

Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Well you're getting an exposure to the market (150%) that's bigger than you're comfortable or believe is optimal. So then you pay money to "insure" it. How about you lower the exposure to something you are comfortable and then get to skip the insurance? That would be my idea. It is possible (and in...
by EfficientInvestor
Sun Oct 06, 2019 8:46 pm
Forum: Investing - Theory, News & General
Topic: HEDGEFUNDIE's excellent adventure Part II: The next journey
Replies: 1252
Views: 74975

Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Well you're getting an exposure to the market (150%) that's bigger than you're comfortable or believe is optimal. So then you pay money to "insure" it. How about you lower the exposure to something you are comfortable and then get to skip the insurance? That would be my idea. It is possible (and in...
by EfficientInvestor
Sun Oct 06, 2019 8:24 pm
Forum: Investing - Theory, News & General
Topic: HEDGEFUNDIE's excellent adventure Part II: The next journey
Replies: 1252
Views: 74975

Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Well you're getting an exposure to the market (150%) that's bigger than you're comfortable or believe is optimal. So then you pay money to "insure" it. How about you lower the exposure to something you are comfortable and then get to skip the insurance? That would be my idea. It is possible (and in...
by EfficientInvestor
Mon Sep 23, 2019 8:20 am
Forum: Investing - Theory, News & General
Topic: A gentle alternative to HEDGEFUNDIE's excellent adventure with 2-Year Treasury Futures
Replies: 54
Views: 4626

Re: A gentle alternative to HEDGEFUNDIE's excellent adventure with 2-Year Treasury Futures

A final note...because the S&P 500 volatility stays constant, my assumption is that this is due to companies ramping down their borrowing as borrowing rates increase in order to maintain their risk. Then they ramp it up when borrowing rates are low. In the same way, shouldn't we also do this with o...
by EfficientInvestor
Mon Sep 23, 2019 6:42 am
Forum: Investing - Theory, News & General
Topic: A gentle alternative to HEDGEFUNDIE's excellent adventure with 2-Year Treasury Futures
Replies: 54
Views: 4626

Re: A gentle alternative to HEDGEFUNDIE's excellent adventure with 2-Year Treasury Futures

@EfficientInvestor could you summarize (or point us to) your analysis on the volatility of short term treasuries under different interest rate environments and leverage levels? (In practice, I worry about my own implementation of this in such a way that it doesn't become "market timing" of differen...
by EfficientInvestor
Wed Sep 18, 2019 12:30 pm
Forum: Investing - Theory, News & General
Topic: The best portfolios when the going gets rough
Replies: 72
Views: 6276

Re: The best portfolios when the going gets rough

Going forward from where we are now I see no alternative to talking on more equity risk in order to get real positive returns. Bonds, commodities, and gold can play roles in a portfolio as do alternate assets but if they dominate the portfolio you're in for a long ride that won't go far in the long...
by EfficientInvestor
Tue Sep 17, 2019 6:20 am
Forum: Investing - Theory, News & General
Topic: Brokerages for Futures Trading in IRA?
Replies: 19
Views: 1285

Re: Brokerages for Futures Trading in IRA?

I have been trading futures in my IRA through TastyWorks for a few months now and have been pleased so far. The creators of thinkorswim created TastyWorks after selling thinkorswim to TD Ameritrade. They charge $1.25/contract on regular futures and $0.85/contract on micro futures. From what I have ...
by EfficientInvestor
Fri Sep 13, 2019 12:59 pm
Forum: Investing - Theory, News & General
Topic: HEDGEFUNDIE's excellent adventure Part II: The next journey
Replies: 1252
Views: 74975

Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

I've decided to eventually transition my lottery ticket play to the futures market. Eliminates the mgmt fee, also eliminates the volatility decay of TMF. 150% SP500 1500% Short-Term Treasuries This isn't a static leverage level...in higher rate environments one would dial down the leverage of STTs ...
by EfficientInvestor
Thu Sep 12, 2019 12:40 pm
Forum: Investing - Theory, News & General
Topic: Long duration is the "Sharpe" choice for aggressively positioned portfolios
Replies: 39
Views: 1508

Re: Long duration is the "Sharpe" choice for aggressively positioned portfolios

Wow, I've heard about this but never seen a comparison this jarring... that is one smooth growth trend there. Ah just kidding... I just saw you dropped equity down to 50%. It would be a much better comparison to maintain the 70% equity exposure and increase STT exposure until volatility aligns with...
by EfficientInvestor
Thu Sep 12, 2019 11:53 am
Forum: Investing - Theory, News & General
Topic: Long duration is the "Sharpe" choice for aggressively positioned portfolios
Replies: 39
Views: 1508

Re: Long duration is the "Sharpe" choice for aggressively positioned portfolios

Wow, I've heard about this but never seen a comparison this jarring... that is one smooth growth trend there. Ah just kidding... I just saw you dropped equity down to 50%. It would be a much better comparison to maintain the 70% equity exposure and increase STT exposure until volatility aligns with...
by EfficientInvestor
Thu Sep 12, 2019 10:55 am
Forum: Investing - Theory, News & General
Topic: Long duration is the "Sharpe" choice for aggressively positioned portfolios
Replies: 39
Views: 1508

Re: Long duration is the "Sharpe" choice for aggressively positioned portfolios

CASHX in PV represents the risk-free rate. Something's wrong. It's wrong. if the risk free rate is zero percent, then obviously you want to borrow infinity dollars and put that in short term treasuries. Of course you do. If you can't actually do that, then we need to be careful about using it in po...
by EfficientInvestor
Thu Sep 12, 2019 10:46 am
Forum: Investing - Theory, News & General
Topic: Long duration is the "Sharpe" choice for aggressively positioned portfolios
Replies: 39
Views: 1508

Re: Long duration is the "Sharpe" choice for aggressively positioned portfolios

I am no expert on portfoliovisualizer, but it seems to me that this stuff of leveraging up bonds using CASHX is really causing phony results in a big way. You be the judge. CASHX is free, evidently. Am I wrong? If you do 10X short term bonds and -9X cash you earn 13% CAGR. It's just wrong. CASHX in...
by EfficientInvestor
Thu Sep 12, 2019 9:46 am
Forum: Investing - Theory, News & General
Topic: Long duration is the "Sharpe" choice for aggressively positioned portfolios
Replies: 39
Views: 1508

Re: Long duration is the "Sharpe" choice for aggressively positioned portfolios

Leveraged short term treasuries have been even sharper since 1991: https://www.portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=2&startYear=1990&firstMonth=1&endYear=2019&lastMonth=12&calendarAligned=true&initialAmount=10000&annualOperation=0&annualAdjustment=0&inflationAdjusted=true&annual...
by EfficientInvestor
Mon Sep 09, 2019 3:31 pm
Forum: Investing - Theory, News & General
Topic: Understanding using treasury futures for leverage to implement risk parity
Replies: 161
Views: 12496

Re: Understanding using treasury futures for leverage to implement risk parity

Risky Parity Considered Risky Through some mechanism you can turn a safe treasury instrument into another thing that is as risky as stock. This is a harmful exercise by itself. In responsible investing we are mixing stocks of high but potentially variable returns with safe fixed income instruments ...
by EfficientInvestor
Wed Sep 04, 2019 1:30 pm
Forum: Investing - Theory, News & General
Topic: Uncle Fred’s Second Coin – The Case for Leveraged Bonds
Replies: 126
Views: 7242

Re: Uncle Fred’s Second Coin – The Case for Leveraged Bonds

Ah I see. It was curiosity more than profitability, should've sad that before haha. I've been trying to argue that rate is no good this entire time. So what rates can you get with futures? Generally, the risk-free rate. You can view the 10 year performance of rolling 2-year futures at this link: ht...
by EfficientInvestor
Tue Sep 03, 2019 7:40 pm
Forum: Investing - Theory, News & General
Topic: Uncle Fred’s Second Coin – The Case for Leveraged Bonds
Replies: 126
Views: 7242

Re: Uncle Fred’s Second Coin – The Case for Leveraged Bonds

^ Yes, that is borrowing at CASH rate. The call you bought is costing you quite a bit more than that. 2.7% is not the current risk-free rate. Also your call has a tiny sliver of time value, barely higher than a dividend. It is most profitably exercised early. You can tell because the put is so chea...
by EfficientInvestor
Tue Sep 03, 2019 3:26 pm
Forum: Investing - Theory, News & General
Topic: Uncle Fred’s Second Coin – The Case for Leveraged Bonds
Replies: 126
Views: 7242

Re: Uncle Fred’s Second Coin – The Case for Leveraged Bonds

It might just be a nomenclature thing then. Your position only makes money if rates drop. To me, that's the ultimate level in speculation and market timing. It's a bet on future rate movement; if they don't drop enough, you lose money. If they drop a little, stay the same, or go up, you lose money....
by EfficientInvestor
Tue Sep 03, 2019 2:01 pm
Forum: Investing - Theory, News & General
Topic: Uncle Fred’s Second Coin – The Case for Leveraged Bonds
Replies: 126
Views: 7242

Re: Uncle Fred’s Second Coin – The Case for Leveraged Bonds

I guess the part I'm confused about is why you'd borrow at 2.7% to invest in a security worse only growth is 2.1%. You're investing in bonds with -0.6% returns. This hardly seems like an Uncle Fred's second toss :/ Because I'm not making my investing decisions based on what the current spread looks...
by EfficientInvestor
Tue Sep 03, 2019 1:51 pm
Forum: Investing - Theory, News & General
Topic: Uncle Fred’s Second Coin – The Case for Leveraged Bonds
Replies: 126
Views: 7242

Re: Uncle Fred’s Second Coin – The Case for Leveraged Bonds

I guess the part I'm confused about is why you'd borrow at 2.7% to invest in a security worse only growth is 2.1%. You're investing in bonds with -0.6% returns. This hardly seems like an Uncle Fred's second toss :/ Because I'm not making my investing decisions based on what the current spread looks...
by EfficientInvestor
Tue Sep 03, 2019 1:06 pm
Forum: Investing - Theory, News & General
Topic: Uncle Fred’s Second Coin – The Case for Leveraged Bonds
Replies: 126
Views: 7242

Re: Uncle Fred’s Second Coin – The Case for Leveraged Bonds

I guess the part I'm confused about is why you'd borrow at 2.7% to invest in a security worse only growth is 2.1%. You're investing in bonds with -0.6% returns. This hardly seems like an Uncle Fred's second toss :/ Because I'm not making my investing decisions based on what the current spread looks...
by EfficientInvestor
Tue Sep 03, 2019 12:27 pm
Forum: Investing - Theory, News & General
Topic: Uncle Fred’s Second Coin – The Case for Leveraged Bonds
Replies: 126
Views: 7242

Re: Uncle Fred’s Second Coin – The Case for Leveraged Bonds

I guess the part I'm confused about is why you'd borrow at 2.7% to invest in a security worse only growth is 2.1%. You're investing in bonds with -0.6% returns. This hardly seems like an Uncle Fred's second toss :/ Because I'm not making my investing decisions based on what the current spread looks...
by EfficientInvestor
Tue Sep 03, 2019 11:57 am
Forum: Investing - Theory, News & General
Topic: Uncle Fred’s Second Coin – The Case for Leveraged Bonds
Replies: 126
Views: 7242

Re: Uncle Fred’s Second Coin – The Case for Leveraged Bonds

If you prefer something buy and hold, leveraged ETFs charge management fees of close to 1%, and is subject to greater volatility decay with daily resets. Thanks for the reply. You could also consider options. The problem with bond options though is that they are not very liquid. But, if you know wh...
by EfficientInvestor
Sun Sep 01, 2019 11:02 pm
Forum: Investing - Theory, News & General
Topic: Uncle Fred’s Second Coin – The Case for Leveraged Bonds
Replies: 126
Views: 7242

Re: Uncle Fred’s Second Coin – The Case for Leveraged Bonds

What gets me about EDV (or PEDIX, which has been around since Sep 2006) is that the sharpe ratio has been substantially lower than that of leverage STT since the inception of PEDIX. Once you decide to play the anti-correlation game, the Sharpe Ratios of individual components are no longer relevant....
by EfficientInvestor
Sun Sep 01, 2019 10:38 pm
Forum: Investing - Theory, News & General
Topic: Uncle Fred’s Second Coin – The Case for Leveraged Bonds
Replies: 126
Views: 7242

Re: Uncle Fred’s Second Coin – The Case for Leveraged Bonds

I just wanted to say that I really appreciate and enjoy the way you present this. I also second your recommendation to ask Bill Bernstein about this on the Bogleheads podcast. However, at MotoTrojan has pointed out, there are actually bonds that can have high returns, high volatility, and low corre...
by EfficientInvestor
Fri Aug 30, 2019 8:53 pm
Forum: Investing - Theory, News & General
Topic: Uncle Fred’s Second Coin – The Case for Leveraged Bonds
Replies: 126
Views: 7242

Re: Uncle Fred’s Second Coin – The Case for Leveraged Bonds

Here's an article on the topic at hand: https://www.advisorperspectives.com/articles/2018/08/13/the-case-for-leveraged-u-s-treasury-bonds Author recommends leveraging short part of the yield curve when Fed is in a rate cutting cycle. Also says that contrary to what you may think....the inverted cur...
by EfficientInvestor
Fri Aug 30, 2019 3:01 pm
Forum: Investing - Theory, News & General
Topic: Uncle Fred’s Second Coin – The Case for Leveraged Bonds
Replies: 126
Views: 7242

Re: Uncle Fred’s Second Coin – The Case for Leveraged Bonds

Also....When just looking at small amounts I could see this working. But say I had a $100k equity portfolio and was wanting 6x SHY. I'd need $600k in exposure....or something like 70 of those contracts. Highly doubt that gets filled. So would have to use futures A good place to start for setting a ...
by EfficientInvestor
Fri Aug 30, 2019 2:15 pm
Forum: Investing - Theory, News & General
Topic: Uncle Fred’s Second Coin – The Case for Leveraged Bonds
Replies: 126
Views: 7242

Re: Uncle Fred’s Second Coin – The Case for Leveraged Bonds

If you prefer something buy and hold, leveraged ETFs charge management fees of close to 1%, and is subject to greater volatility decay with daily resets. Thanks for the reply. You could also consider options. The problem with bond options though is that they are not very liquid. But, if you know wh...
by EfficientInvestor
Fri Aug 30, 2019 1:56 pm
Forum: Investing - Theory, News & General
Topic: Uncle Fred’s Second Coin – The Case for Leveraged Bonds
Replies: 126
Views: 7242

Re: Uncle Fred’s Second Coin – The Case for Leveraged Bonds

2) Ultimately, I would say they are pretty close. However, they are different products and you have to consider the differences. With futures, you are just getting directional exposure with leverage. When you buy an option, you are getting directional exposure with leverage AND you are buying insur...
by EfficientInvestor
Fri Aug 30, 2019 12:58 pm
Forum: Investing - Theory, News & General
Topic: Uncle Fred’s Second Coin – The Case for Leveraged Bonds
Replies: 126
Views: 7242

Re: Uncle Fred’s Second Coin – The Case for Leveraged Bonds

If you prefer something buy and hold, leveraged ETFs charge management fees of close to 1%, and is subject to greater volatility decay with daily resets. Thanks for the reply. You could also consider options. The problem with bond options though is that they are not very liquid. But, if you know wh...
by EfficientInvestor
Fri Aug 30, 2019 10:38 am
Forum: Investing - Theory, News & General
Topic: Uncle Fred’s Second Coin – The Case for Leveraged Bonds
Replies: 126
Views: 7242

Re: Uncle Fred’s Second Coin – The Case for Leveraged Bonds

If you prefer something buy and hold, leveraged ETFs charge management fees of close to 1%, and is subject to greater volatility decay with daily resets. Thanks for the reply. You could also consider options. The problem with bond options though is that they are not very liquid. But, if you know wh...
by EfficientInvestor
Fri Aug 30, 2019 6:13 am
Forum: Investing - Theory, News & General
Topic: Uncle Fred’s Second Coin – The Case for Leveraged Bonds
Replies: 126
Views: 7242

Re: Uncle Fred’s Second Coin – The Case for Leveraged Bonds

If you prefer something buy and hold, leveraged ETFs charge management fees of close to 1%, and is subject to greater volatility decay with daily resets. Thanks for the reply. You could also consider options. The problem with bond options though is that they are not very liquid. But, if you know wh...
by EfficientInvestor
Thu Aug 29, 2019 12:19 pm
Forum: Investing - Theory, News & General
Topic: Dr. Bill Bernstein: Next "Bogleheads on Investing" podcast guest
Replies: 56
Views: 5266

Re: Dr. Bill Bernstein: Next "Bogleheads on Investing" podcast guest

I recently made a post on the forum ( https://www.bogleheads.org/forum/viewtopic.php?f=10&t=289049#p4718045 ) regarding Dr. Benrstein's Uncle Fred's coin flip scenario. I proposed that leveraged bonds would be the best option to use as the second coin. I would be curious to hear what Dr. Bernstein w...
by EfficientInvestor
Wed Aug 28, 2019 4:06 pm
Forum: Investing - Theory, News & General
Topic: Uncle Fred’s Second Coin – The Case for Leveraged Bonds
Replies: 126
Views: 7242

Re: Uncle Fred’s Second Coin – The Case for Leveraged Bonds

MotoTrojan wrote:
Wed Aug 28, 2019 4:05 pm
Lee_WSP wrote:
Wed Aug 28, 2019 3:53 pm
How would one achieve 6 or even 3x leverage on STT?
Futures.
2-year treasury (/ZT) futures contracts primarily. You could also use options on SHY, but they aren't very liquid.
by EfficientInvestor
Wed Aug 28, 2019 1:10 pm
Forum: Investing - Theory, News & General
Topic: Uncle Fred’s Second Coin – The Case for Leveraged Bonds
Replies: 126
Views: 7242

Re: Uncle Fred’s Second Coin – The Case for Leveraged Bonds

. The best data set we can look at to show performance during an extended rising interest rate environment is 1955 - 1981. As the image below shows, leveraged short term bonds performed better than unleveraged long term bonds. The amount of leverage used on the STT was chosen so that the St Dev wou...
by EfficientInvestor
Wed Aug 28, 2019 12:54 pm
Forum: Investing - Theory, News & General
Topic: Brokerages for Futures Trading in IRA?
Replies: 19
Views: 1285

Re: Brokerages for Futures Trading in IRA?

I have been trading futures in my IRA through TastyWorks for a few months now and have been pleased so far. The creators of thinkorswim created TastyWorks after selling thinkorswim to TD Ameritrade. They charge $1.25/contract on regular futures and $0.85/contract on micro futures. From what I have h...
by EfficientInvestor
Wed Aug 28, 2019 12:37 pm
Forum: Investing - Theory, News & General
Topic: Uncle Fred’s Second Coin – The Case for Leveraged Bonds
Replies: 126
Views: 7242

Re: Uncle Fred’s Second Coin – The Case for Leveraged Bonds

As for LTTs, I prefer not to use them due to the additional term risk. I prefer to use shorter term treasuries with additional leverage. Can you help me understand this? If you leverage 2yr to have the same effective duration as 20yr, how is your risk/performance vastly different? I guess I would e...
by EfficientInvestor
Wed Aug 28, 2019 6:15 am
Forum: Investing - Theory, News & General
Topic: Uncle Fred’s Second Coin – The Case for Leveraged Bonds
Replies: 126
Views: 7242

Re: Uncle Fred’s Second Coin – The Case for Leveraged Bonds

I wish -35% were a three standard deviation event for stocks! That's three years out of 1,000. Instead we had three years in the last 90 years (1931, 1937, 2008). Conclusion: stock returns are not normally distributed. I agree with your conclusion of stocks not being normally distributed and I was ...